The ongoing conflict has significantly impacted various sectors, notably aviation, tourism, agriculture, and more.
Aviation
Airlines experienced immediate disruptions as they canceled flights to the affected region. Although Middle Eastern airlines account for only 9.5% of global flight capacity, they serve as crucial hubs for long-haul travel between Europe and Asia and have been severely impacted.
Qatar Airways had to cancel nearly 91% of its flights following the outbreak of hostilities on February 28, as per data from aviation analytics firm Cirium.
Etihad, based in Abu Dhabi, canceled almost three-quarters of its flights, while Dubai-based Emirates reduced its operations by nearly half. All airlines are feeling the pressure from soaring jet fuel prices, which have doubled since pre-war levels. Fuel costs make up about a quarter to a third of airline operating expenses, prompting some carriers to pass on increased costs to consumers by adding surcharges or hiking fares.
Several airlines have started to scale back their flight schedules due to the higher fuel costs and limited supplies, which have been disrupted by the conflict and export restrictions imposed by some countries.
Tourism
The disruptions and increased airfare will affect tourists’ ability and willingness to travel. Oxford Economics projects that, even with a swift resolution to the conflict, the Middle East could see an 11-27% decline in visitor arrivals this year compared to a previously anticipated 13% growth. Given that Middle Eastern airlines are key travel hubs and airlines globally are raising fares, the impact is likely to be more widespread.
The conflict may lead to a reduction of 116 million visits and 858 million hotel nights outside the Middle East this year, according to Oxford Economics.
Nonetheless, countries like Spain and Portugal might benefit as tourists opt for their beaches over those in the Middle East. In Europe, there was a six percent drop in hotel revenue per room—a key financial indicator—in the first week of the conflict, according to MKG Consulting. In the subsequent two weeks, the decline was just one percent in the UK and France but reached 23.5% in Ireland and 15.4% in Portugal, which rely heavily on international tourists.
Maritime Transport
Shipping handles 80% of the world’s traded goods. The average 20% increase in fuel costs for ships is driving up overall shipping expenses. While the Asia-North America shipping routes have remained relatively unaffected, those between Asia and Europe, as well as Asia and Africa, have been disrupted, since ports in the Gulf and the Red Sea are often used as transfer points, according to Cyrille Poirier Coutansais from the French Ministry of Defense’s maritime security research center.
Shipping companies also have several vessels stranded in the Gulf. Those wishing to avoid the Red Sea and the Suez Canal must take the significantly longer route around Africa, which increases delivery times and shipping costs.
Agriculture
The Gulf region produces about 30% of the world’s fertilizers, a crucial agricultural resource for cost efficiency and high yield assurance. The region is a vital supplier to Asian nations, many of which have had to suspend their production due to the soaring natural gas prices used in their manufacturing processes.
There are concerns that a prolonged conflict could lead to shortages, while high prices may force some farmers to do without them. Farmers are also facing increased costs for diesel needed for tractors and other equipment, as well as gas used for heating greenhouses and livestock enclosures.
Luxury Goods
The Middle East is a significant market for the luxury industry, with airports in Abu Dhabi, Doha, and Dubai serving as important distribution centers. Analysts at Bernstein expect luxury goods sales in the region to halve in March, primarily due to the decline in tourism.
